January 7, 2008

Surgical Implant/Ethical Bypass: The Story of Dr. Chan

The Insider has often speculated about the thought process of medical providers, so we are very interested in case of Dr. Patrick Chan, a neurosurgeon working out of Searcy, Arkansas. The Canadian trained doctor has pleaded guilty to charges of demanding and accepting kickbacks from surgical implant maker Blackstone Medical of Springfield MA, a subsidiary of Orthofix International. Dr. Chan used the (expensive) devices in back surgeries. He was a very busy fellow, billing about $200,000 a month. He has amassed a $10 million nest egg (minus the court-assessed penalty of $1.5 million plus substantial legal fees).

The kickback scheme initiated by the doctor raises two compelling issues: one involves how a doctor determines which medical device to use. Dr. Chan reduced that decision tree to its barest branches. "I use the device that pays me the most money."

The second dimension of Dr. Chan's thought process involves utilization: when should a specific device be used? Apparently, Dr. Chan went out of his way to find opportunities to use his preferred surgical implants. His work is being reviewed to determine whether the surgical procedures were in fact needed. One suit, filed in Arizona, alleges that in 2005 Dr. Chan told his patient, a young trucker, that if he did not agree to implantation of a spinal device, he was at risk of becoming a quadriplegic. After the surgery, a worker's compensation evaluation of the MRI done prior to the procedure showed that it was medically unnecessary. [NOTE to insurer: Speed up the utilization review process!]

Breakthroughs, Innovations...and Scams
Blackstone Medical touts itself as the home of "Breakthrough Thinking." Parent company Orthofix is "always innovating." Unfortunately, high level thinking and innovation, along with overly ambitious marketing goals, have led the companies into an ethical morass.

Dr. Chan is currently under house arrest and awaiting sentencing. He faces up to five years in prison. We can assume that he is under considerable pressure to testify against his former suppliers. It's ironic, of course, that Dr. Chan and the people at Blackstone began with the same goal in mind: helping people in pain. They intended no harm, but, alas, much harm has apparently been done.

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1 Comment

I appreciate the coverage of this story, although not directly worker's compensation related, because of the far-reaching implications of the problem noted: When is your doctor responding to your legitimate medical needs and when is he (or she), instead, engaging in profiteering with device companies for his (and the companies') financial benefit. It's a scary thought that your doctor might care less about your welfare, if it means that he pads his own bank account and increases sales for multimillion dollar corporations. I am one of the attorneys with a lawsuit against Dr. Chan and Blackstone Medical. It is erroneously noted in the above article as being filed in Arizona. In addition, Dr. Chan did not plead guilty to accepting kickbacks from Blackstone Medical, but rather to accepting kickbacks from a sales representative of Orthofix. At the time that he was accepting the cash payments from Orthofix, he was also under so-called "consulting" agreements with Blackstone Medical, in which he ultimately garnered about $100,000 in miscellaneous payments along with 120,000 shares of stock. Blackstone is itself presently under federal investigation. The relationships get a little coincidental, since Orthofix purchased Blackstone for a reported $333 Million in August of 2006. Dr. Chan, now a convicted felon, was arrested in September of 2006.

The 1.5 Million payment noted in this article was not a court-imposed penalty at all, but was a settlement by Dr. Chan of a related qui tam or whistleblower lawsuit in federal court that alleges that Chan had ongoing illegal dealings with Blackstone Medical, primarily. His settlement of that action may arguably be considered an admission of the allegations that he -- and Blackstone Medical -- committed years of fraud in stealing from the federal and state government for use of products in surgeries that were largely unnecessary. The real victims in such schemes are the patients whose lives are forever changed, and often destroyed, by the implantation of surgical products in procedures that never needed to be done in the first place.